What is Factoring?

Factoring is a simple cash flow solution, which turns long due freight bills into quick cash. Although, it may seem like a new concept to many industries, factoring has been around for quite some time now. Surprisingly, factoring began during the Mesopotamian times, and it gradually emerged as a common financial practice before 1400s in England.

Learn-to-Sell-Invoices

So, let’s take a look at some of the industries that commonly use the process of factoring:

  1. Transportation
  2. Freight bills are generally not paid until well after delivery, and it certainly involves a good deal of expense to get them delivered. Although, it’s not a big deal for larger companies, in case you’re running a small to medium sized fleet, immediate cash is often needed to pay for operating costs such as payrolls, maintenance and fuel costs.

  3. Oilfields and Gas
  4. Running an oilfield and gas operations undoubtedly requires huge capital investment and yet payment terms can run up to 60, 90 to 120 days. Its only when you have immediate access to cash in this industry, you can explore the full potential and take advantage of the robust demand for work in oilfields and gas industry.

  5. Government
  6. The lengthy and complicated terms and conditions of invoices can weigh down upon government contractors. Accounts receivable financing not only provides the government instant access to required cash to fund the contractors, but the factor assumes the receivables and risks that come along with them.

  7. Staffing

Dealing with long invoice terms of 60 to 90 days and managing human capital at the same time can get very challenging. When you’re backed with a staff most often there are pre-employment and payroll taxes which go along the paychecks. Invoice financing, on the other hand provides you instant access to cash you need to pay your employees and tax liabilities and also help to fund budding opportunities.

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